The Hindu Business Line : Consumer preference driving up prices of rice

Chennai, March 19 Higher support prices for paddy, increased consumer preference for branding and tight supplies have contributed to a hike in retail prices of rice. But consumers have a wide range of choices in unbranded rice segment, which is expected to drop in the coming weeks, say traders.

Supply constraints

With elections around the corner, supply constraints are fast being addressed and this would dampen prices in the coming weeks, they say.

For Chennai and northern parts of Tamil Nadu, the drop in arrivals from Andhra Pradesh, the major source for rice, has buoyed prices.

The local authorities there have decided to hold on to stocks to dampen market sentiments at home.

But now with enough stocks piled up in Andhra Pradesh the supply is expected to pick up, according to traders.

Value-addition

Tracing the value-addition and price increase from the farm level, a trader said with support prices hiked this year, farmers get Rs 1,050 a quintal of paddy from rice mills and government purchase centres.

After processing at the rice mills where a kg of paddy yields about 600-650 g of rice, wholesale rates range around Rs 28-30 a kg including the processing cost for the mill. This, in turn, goes up to Rs 32-33 a kg at the retail end.

Mr S. Palanisamy, Vice-President, Tamil Nadu Rice Mill Federation, says consumers have a wide range of choice in rice prices.

While Rs 32-33 a kg is the range commonly in demand, there are stocks that range between Rs 26 a kg to Rs 35 and more. The modern day consumer prefers the highest grade in attractive packs with the rice grains requiring little cleaning and washing prior to cooking. This would naturally be more expensive, he says.

Drop in arrivals

Mr D.V. Krishna Rao, a leading rice merchant who brings in stocks from Andhra Pradesh, says for now Chennai city is supplied from local growing centres and Karnataka. Andhra Pradesh supplies have dried up except for some arrivals from border areas. Normally over 100-150 truck loads of rice come to Chennai and this dropped to almost nothing.

Between the wholesaler and trader there is a difference of just a few rupees. New stocks of Ponni raw rice costs about Rs 26-27 a kg and aged stocks – the preferred option for rice –is around Rs 32 a kg, he said.

In the paddy-belt in the Cauvery delta region, Mr S. Chandrasekhar, President, South Zone Rice Mill Federation, says the preference for branded products among the consumers contributes to the increasing prices. Retail prices can go up as high as Rs 35-37 a kg compared with wholesale price of Rs 28 a kg. Millers were also going in for modern machines that reduce the yield of rice from paddy.

Sourcing widely

Mr B. Rajantran, Managing Director, High Tech Agro Foods Pvt Ltd, who set up a three-tonne an hour rice mill near Tiruchi a couple of years back is expanding the unit with new machinery from Brazil. The consumer preference is driving the need for higher quality of rice, he says.

Modern mills like that of High Tech Agro source paddy from a wide range of areas including the States in the west and central India. Paddy prices can go up as high as Rs 17 a kg with rice yields dropping to about 56 per cent. Here rice prices for the miller costs around Rs 34-35, which would mean a retail price of over Rs 37 a kg.

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